Magna plans 5b euro Opel investment

Dubai: Frank Stronach, the Austrian-born self-made billionaire and founder of the global auto supplier and contract car manufacturer Magna Inc based in Aurora, Canada, is ready to invest five billion euros (Dh24.3 billion) together with Russian partners into Opel to avert bankruptcy of the loss-making German carmaker.

Stronach, 76, was quoted by Austrian daily“Kleine Zeitung''last week that he“wants to help Opel but is not willing to buy a stake in the company.

Opel, one of Magna's most important customers for car parts, is on the brink of bankruptcy after its parent company General Motors announced it was unable to finance operations any further and was willing to sell at least 50 per cent of the brand. The statement has triggered massive protests by Opel workers throughout Germany and caused the German government to consider a 3.3 billion euro security loan to protect about 100,000 jobs jeopardised by the possible bankruptcy.

General Motors has set a deadline until the end of May for any offers for Opel or a government bailout.

Stronach said the survival of his customer would be worth the expense of several billions. He did not specify who his Russian partners were. But according to industry experts Russian carmaker GAZ, owned by billionaire Oleg Deripaska, and Russia's largest business bank Sberbank, are Stronach's most likely co-investors.

The Russians are expected to opt for 31 per cent of Opel and Magna for 19.1 per cent, which has not been officially confirmed.

Germany's economy minister Karl Theodor zu Guttenberg said that Magna had already submitted a very interesting basic concept of how to restructure and sustain Opel's operations. But the German government is demanding guarantees that no Opel factories will close as well as an extensive job security programme for Opel workers.

Stronach's answer was that in today's difficult climate neither investors nor governments, let alone workers' unions, are able to issue job guarantees.

However, Stronach's offer has triggered a much more positive response among Germany's car worker unions than the previously announced bid from Italian carmaker Fiat to take over a majority in Opel, German weekly Wirtschaftswoche'' reported. The Italian offer - less than a billion euros - is not considered serious by the German government as well as by Opel's owner General Motors.

Stronach stressed that Magna has the liquidity to invest into Opel despite the market downturn. He said his company has 1.5 billion euros in cash and therefore is financially capable of helping its customer.

On the other hand, Magna is depending on orders by the big three US automakers - General Motors, Chrysler and Ford - and has suffered a 40 per cent decline in the respective revenue since the outbreak of the crisis in the American auto industry.

Adding to this, the recent Chapter 11 filing by Chrysler is expected to have a considerable negative impact on Magna since its contract manufacturing of some of Chrysler's core models for the non-US market is likely to be discontinued or significantly downsized at least.